What Hedge Funds Own – and What It Says About the Market By Carleton English May 26, 2020 6:30 am ET Photograph by Spence Platt/Getty Images Hedge funds’ favorite holdings were boosted by a surge in trading activity by smaller investors, data from Goldman Sachs shows. The first quarter saw a “surge” in retail investor trading activity with daily average trades climbing more than twofold at the beginning of the year, compared to previous years. Robinhood, the popular trading platform for younger investors, saw triple the activity early this year, according to Goldman Sachs’ hedge fund trend monitor. “This sharp increase in retail trading has helped a basket of popular retail stocks outperform the S&P 500 by 13 percentage points year to date,” Goldman said in its report. Among some of the most popular names for hedge funds–those that frequently appear in the top 10 holdings for the funds–were Amazon.com(ticker: AMZN) and Microsoft(MSFT). The two, which are often hedge fund favorites, saw the largest increase in hedge fund popularity last quarter. Facebook(FB), Alphabet (GOOGL) and Alibaba (BABA) rounded out the top five most popular holdings, marking the seventh consecutive quarter of these names dominating the pack. “As investors grappled with the largest economic collapse on record, they shifted further into already-popular large-cap secular growth stocks, boosting momentum strategies,” Goldman wrote. There were 12 new entries for Goldman Sachs list of 50 “Very Important Positions” for hedge funds. Activision Blizzard(ATVI), Crown Holdings(CCK), and Change Healthcare(CHNG) were three of the names joining the list. Other names joining the list were: Equinix(EQIX), HCA Healthcare(HCA), Liberty Broadband (LBRDK), NVIDIA(NVDA), Raytheon Technologies(RTX), Tech Data(TECD), T-Mobile US (TMUS), UnitedHealth Group(UNH), and Zynga(ZNGA). Goldman’s “VIP” basket has outperformed the S&P 500 in 61% of quarters since 2001, the company’s data shows. Goldman compiles its list by examining holdings of 822 hedge funds, representing $1.8 trillion of gross equity exposure. The analyst team completed its assessment from 13F filings, in which show funds’ long only positions as of the last day of the first quarter, as well as other sources. Investors often like to scour hedge funds 13F holdings for new ideas, though using them properly requires some finesse. The data is received 45 days after the quarter closes, meaning that funds may have already exited positions.Data from Pivotal Path, compiled through April shows that some funds already trimmed back popular stay-at-home plays such as Zoom Video Communications(ZM) and Slack Technologies(WORK), for example. With markets as volatile as they have been, the dated holdings required an even more careful eye, meaning investors will want to compare 13F holdings from various periods to get a sense of the fund’s overall strategy and would want to compare holdings of various funds to get a sense of broader momentum plays. Write to Carleton English at carleton.english@dowjones.com https://www.barrons.com/articles/wh...-market-51590489000?mod=hp_FUNDS&refsec=funds
^^ that - after the fact is useless information for retail investors. are hedge funds returns really that good, or is it 'for them' all about the [incentive fees/high water mark] 2/20?
Not necessarily. If you know the fund, and you know its track record, those 13-G's can be a goldmine to an astute long term investor. Sure that info is up to 45 days old.... but a smart investor always maintains a "shopping list" for the next big correction. These cats that pick those stocks are extremely well versed in finance, accounting, economics, and oftentimes possess highly specific sector expertise. They get paid very well to do tons of due diligence on a company and they know it far better than you or I could ever hope to. When was the last time you toured a factory before investing several million in a stock? I've never. Form 13-G's are one of the few real gifts we as retail "investors".... (not traders)... have. You are getting the work of the brightest minds on Wall Street absolutely free. They're gold. Just imagine if you had a shopping list of high quality stocks already in place last March. They've done all the work for ya.
@sle used to say we retails didn't understand risk adjusted returns and hedging. The institutions and high net worth individuals who invested in hedge funds are not looking at absolute returns. What is mediocre to us retails is quite often not mediocre to someone with multiple streams of income.
That's nice to say on paper. But most hedge funds don't even hedge!!! On down markets, they lose just as much as the index does and sometime worse. Good try on the marketing bullshiet that HNWs fall for.
There are hedge funds and then there are hedge funds. Just like us retails there are retails and then there are retails. I don't know who HNW is but @sle was one of a few major institutional pros on this site. I learned an awful lot from reading his posts. If you haven't come across them I suggest you do a search, it could be helpful.
Yeah, SLE was the best. Not to mention he had (hopefully still has) the worlds coolest dog. Big 'ol thing lol. 100#'s of pure love.
HNW are High Net Worth individuals who are the ones qualified to invest in hedge funds. They are suckers for exclusivity. But at the end of day, returns matter...